When Katlego Maphai walked into a small barbeque restaurant in San Francisco in 2012, he noticed the lack of credit card facilities but that the eatery was using the newly-launched Square to take payments. “The lightbulbs went off,” the former Delta Partners consultant told me.The Yoco mobile point-of-sale device. YOCO

Maphai was working for Nigerian e-commerce site Jumia at the time, dealing with the problems of taking payments in a country where e-commerce was still in its early days and was trying find a viable business model.
“I noticed Square for the first time in the [San Francisco] Mission District in 2011 while strolling through an antique store. It was during a visit exactly a year later in 2012, that I saw it proliferate, seeing it in small stores, taxis, etc. An old friend took me to a hole-in-the-wall barbeque eatery run by an African American lady,” he recalled. When it was time to pay, “she takes out this rundown Android phone, plugs in the Square reader and my friend signed with his finger. Here was a small business with a good product, nothing much else, and they were running their business with their phone.”
By being able to accept a credit card through a mobile phone (and without the traditional card point-of-sale system) allowed the store to bill a larger basket size “all set off light bulbs”.

Maphai returned to his home in South Africa and launched his own mobile point-of-sale (M-POS) startup called Yoco with three friends in October 2015.
After developing the prototype of the M-POS, the company “took a bold decision to do a year-long beta with about 500 merchants,” he says. “We really went deep to understand the user interactions and started building our support model.” They used data analytics to check if there’s a problem and then push that to the merchant (such as recharge the battery) and tweaked their software and service to “dramatically reduce our cost to serve” their customers.

After this first year, Yoco had processed R13-million (About $1-million), a not-insignificant amount for a fintech startup in South Africa, which has the most sophisticated financial services industry in Africa and is well served by several major banks that regularly receive global awards for innovation and excellence.

Yoco’s card reader and new point-of-sale app running on a tablet. The receipt printer is built into the base. YOCO

In June Yoco was named one of the “250 top private companies changing the face of financial services around the world” in the Fintech 250 report by researchers CB Insight. One of only five African startups to make the prestigious list, the report praised Yoco for its “powerful business portal”.
In July Yoco celebrated signing on 10,000 customers. “This milestone is indicative of the significant demand for these kinds of services in the small- and medium enterprise (SME) sector,” Maphai says.
This week, Yoco launched its new point-of-sale app that runs on both smartphones and tablets, as well as reaching 14,000 customers.
For a small business to get a credit card terminal in South Africa involved a process of several weeks of applying for a device and having it delivered. Yoco offers this within two days, he says, and is adding 1,200 merchants a month.
“About 25% of our sales now are through word-of-mouth,” he told me proudly in the firm’s first retail store in the well-heeled Johannesburg suburb of Parkhurst, which is also where South Africa’s first resident-initiated “tender” for fibre-to-the-home took place three years ago through a company called Vumatel.
More impressive for Yoco is that “72% of our base had never accepted card payments before. We are effectively building our own market,” Maphai says.
After the beta, Yoco officially launched in October 2015. “What’s been great is from the launch, from 500 merchants, we ended 2015 with 5,000 merchants. We grew 10 times.”
He adds: “Our most recent milestone announcement was getting to 10,000 customers in mid-2017 and now we’re adding over a thousand merchants a month.”

Yoco’s new point-of-sale app. YOCO

Yoco’s top category, not surprisingly, is bars and restaurants. “M-POS was never seen as the product for these sectors. It was always seen as the product for the plumbers and artisans. But everyone goes to bars, everyone drinks coffee. This has been a key component for driving our other growth, by being visible in these sectors.”
The next sectors Yoco is focussing on are small retail businesses, then the health and beauty industry – “beauticians and hair salons have been very exciting for us, just seeing that growth” – and doctors.
Because Yoco is cloud-based and the software is developed in-house, it offers its customers a powerful back-end system that gives a breakdown of sales, forms of payment and tracks revenue. This kind of free business intelligence offering is a strategic advantage, he says.
“It’s an ERP tool for our customers,” Maphai says of the enterprise resource planning functionality. “We have almost no fraud on the platform,” he adds with satisfaction.
The beta period’s extensive research paid off with a well-honed initial offering. “Service is our top-ranked feature and now, with 14,000 merchants, we only have to be service agents,” he said proudly.
Merchants pay for the terminal but not fixed monthly fees, instead of using a pay-as-you-go model for transactions. “We’re not in the price game. Our pricing strategy is always to be in the middle of the market. We are really focussing in on the value side,” says Maphai. Yoco charges 2.95% pay per transaction and offers its new point-of-sale software for free. The card-reader connects via Bluetooth to a smartphone or tablet, on which the software runs. Ultimately premium POS features will be charged for, he adds.
Maphai reiterates that with nearly three-quarters of his customers leaping directly to cloud-based, smartphone-based transacting, it is a powerful enabler for business.
“One of the most amazing things for me is seeing these services, who never had a credit card machine and were using paper, are now using cloud-based software. They have an intelligent terminal, not just a dumb thing that prints out paper, and an app that can run on multiple devices.”
Furthermore, “we have the web portal, which is business intelligence (BI) tool. They have gone from nothing to using BI. in this tool they can see the analytics of their business: the average basket size, what’s selling, what isn’t. They can see peak trading days and times, and in detail. Instead of having to guess these things, they can see them. All in real time.”
Lungisa Matshoba, Yoco chief technology officer and co-founder, says the company rewrote its software from scratch for the new POS app, using Google’s Firebase and ReactNative from Facebook.
“We did a complete platform change and rebuilt everything from the ground up from the last platform, which was fully native iOS and Android,” he told me. “We realised it was a complete departure from the old, which was focussed just on payment. The main benefit for us is that most players use POS for one platform, but we wanted to be cross platform. We wanted to have same quality one gets from a native app.”
This is Matshoba’s successful startup, after he sold his first – Yiego Communications – to Tellfree. His Yiego co-founder is the well-known entrepreneur Rapelang Rabana.
Yoco works with cloud-based accounting tool Xero, which launched in South Africa last year, and is negotiating with other accounting software firms.
“Ultimately our goal is really to automate all of these mundane non-value automation tasks and really get to a point where even the smallest business owner can focus on customer engagement and growth.”
He sees the bigger economic picture and how Yoco can assist with economic growth. “The only way to drive the future in this country, on this continent, is SMEs. They drive the majority of employment and build the economy.”
Ultimately, he adds: “We’ve seen this massive opportunity to almost become the operating system for these SMEs.”